Trade with Commodities: Monsoon’s return washes away fears of spurt in food prices

Monday, June 1, 2009

Monsoon’s return washes away fears of spurt in food prices

Sowing Of Kharif Crops In June Dependent On Generous Showers

WITH the monsoons reviving after a lull, fears of another spike in food inflation have been dispelled for now. Monsoons have advanced over the southern states of Karnataka and Andhra Pradesh after a week's break, the India Meteorological Department said on Monday.
    Agri commodity analysts pointed out that any further delay in revival in rain would have led to a spike in the prices of kharif crops. "Further delay hereafter (in advancement of monsoon) would have affected land preparation and sowing activities. In such events, the prices of kharif crops would have moved higher," said Karvy Comtrade Ltd chief analyst Harish Galipelli.
    Monsoon showers are key to the cultivation of kharif crops, which account for nearly 60% of the annual agricultural output. Sowing of the kharif crops is to start in the second week of June. A good kharif harvest is essential to keep the rural demand robust, which has largely been the reason why the Indian economy has been able to withstand the global economic turmoil better than other countries.
    But all that good work will go in vain if the rains are further delayed. After touching a ten-year high of 11.64% in early January, annual inflation for food price has eased to 8%, as per the latest figures. Consumer price inflation has dropped from double digit figures early this year to around 8.5% in April.
    Besides keeping the kharif production robust, timely monsoons are also expected to help in the cultivation winter crops such as corn, lentils and soybeans, which are planted after the onset of the rains.
    Sharekhan commodity research analyst Mehul Agrawal pointed out that with normal monsoons in the offing, one can expect the prices of agri-commodities to remain low without hurting the profits of farmers. "Farmers' revenue would not be hurt as lower price could be well cushioned by higher output to nullify the fall in price. Cyclical factors in terms of demand, supply and demand destruction at higher price will play their own role," Mr Agarwal added.